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OpenMarket: Labor and Employment

In our scorecard of the United States Senate’s labor and employment votes, CEI's WorkplaceChoice.org has included voting on the movement of David Weil’s confirmation to be Administrator of the Wage and Hour Division of the Department of Labor.

Strictly Partisan Confirmation

In vote # 110, a strictly partisan vote of 51-42 on April 28, 2014, the U.S. Senate confirmed controversial professor David Weil to administer the Department of Labor’s Wage and Hour Division, which implements such policies as overtime, prevailing wages, family and medical leave, migrant worker programs, and minimum wage. Seven Senators did not vote.

Nuclear Option Controversy

The controversy over Weil’s nomination was inflamed by the “nuclear option,” a new strong-arm tactic implemented by Majority Leader Harry Reid (D-Nev.) for the first time this Congress to prevent filibustering lightning-rod personnel. The nuclear option effectively lowers the vote threshold for approving nominees to a simple Senate majority (51 votes) from the 60 votes previously needed. Thus on vote # 109, the cloture motion to end any filibuster, the same strictly partisan 51-42 vote manifested the deep division on Weil’s propriety.

Views of Senator Lamar Alexander, Top Republican on the Labor Committee

Senator Lamar Alexander, the top-ranking Republican on the jurisdictional U.S. Senate Committee on Health, Education, Labor and Pensions (HELP Committee), explained in a statement that, “To fill this position, we need someone who can be trusted by both employees and employers to enforce the law without bias; and we need a qualified manager. Unfortunately, I think Dr. Weil fails to meet that standard.”

Senator Alexander added, “I cannot support a nominee who has advocated expanding current law beyond what Congress intended. Nor could I support a nominee who is a proponent of targeting industries and employers who use certain business models rather than being responsive to complaints of breaches of the law. Or one that has the underlying goal of increasing unionization, without regard to the desires of employees themselves.”

“Dr. Weil’s writings suggest he may have a bull’s eye on industries that use subcontracting and franchising,” Alexander said.

Confirmations Rare for Wage and Hour Administrators

In an interview, Littler Mendelson attorney Tammy McCutcheon recollected that with her confirmation in 1991 she was the last nominee to be confirmed as Administrator to the Wage and Hour Division. Jackson Lewis attorney Paul DeCamp, who followed Ms. McCutcheon, was recess-appointed in 1996. As another example, Seyfarth Shaw attorney Alex Passantino served as Acting Administrator in 2008 and 2009.

The position has been completely vacant under President Obama. The Washington Times explains, “Mr. Obama’s first selection, Lorelei Boyland, withdrew her name amid Republican opposition over her involvement in a state ‘wage watch’ program in New York, a first-of-its-kind program that deputized unions and advocacy groups to visit private businesses and report wage violations to the government. The administration yanked a second nominee, Leon Rodriguez, in 2011.”

Confirmation Hearing Less Than One Month After Nuclear Option Implemented

Weil was nominated by President Barack Obama in September of 2013, and “The Senate Health, Education, Labor and Pensions Committee held Mr. Weil's confirmation hearing on Dec. 10, less than a month after the rule change,” The Wall Street Journal noted. That rule change is the “nuclear option” strong-arm tactic that took effect in November of 2013.

Over at Vox.com, former WaPo blogger Brad Plumer wrote a post about highway funding, largely relying on the good folks over at the Pew Charitable Trusts, who published this analysis of transportation funding and financing yesterday. The numbers are sound. There are major funding challenges facing the federal transportation programs. We can all agree on that. But Plumer ignores a couple of key facts that might color his narrative a bit differently. He writes:

Ever since the Reagan administration, roughly four-fifths of federal transportation spending has gone toward highways, while one-fifth has been specifically set aside for mass transit projects.

In recent years, some Republicans have pushed to eliminate the fixed share of federal money for transit, arguing that local bus and subway projects should be financed by user fees rather than federal gasoline taxes. These challenges have been unsuccessful so far, though, and mass transit has maintained its dedicated funding stream.

[...]

For decades, federal highway spending was largely financed by the Highway Trust Fund, paid for by federal gas taxes. The idea was that roads and highways would be paid for by the people actually using them. But this is no longer the case.

As the first column shows, the federal gas tax only covered about 72 percent of all federal highway spending in 2011. Congress had to scrounge up the rest from the general fund. Indeed, every single state now receives more in federal highway money than it pays in federal gas taxes — with some states receiving significantly more.

Thus warns Warren Buffett in his latest message to investors, part of Berkshire Hathaway's annual report. And when the Oracle of Omaha speaks, most of the world listens. So here's hoping his warning of the dangers that underfunded public pensions liabilities pose to state and local governments brings some needed public attention to this problem.

Local and state financial problems are accelerating, in large part because public entities promised pensions they couldn’t afford. Citizens and public officials typically under-appreciated the gigantic financial tapeworm that was born when promises were made that conflicted with a willingness to fund them. Unfortunately, pension mathematics today remain a mystery to most Americans.

The math being "a mystery to most Americans" is a major factor that has enabled state and local politicians to underfund pensions for years, by calculating contributions using discount rates based on overly optimistic investment return projections.

Despite reforms in more than 40 states, many pension funds are still in bad shape. As Benefits Pro's Lisa Barron reports, ""Moody's Investor Services estimates that the liability increased 24 percent, from $998 billion in 2011 to $1.2 trillion in 2012, the latest available data with audited results."

Michigan becoming the nation's 24th right to work state in 2012 appeared to pose a challenge to major industrial private sector unions like United Auto Workers. But it's also posed a major challenge to public sector unions in the Wolverine State -- or rather, a scheme to reclassify as "public employees" a group of people who aren't even directly employed by the state.

The group in question is home health care workers who receive state assistance. How were they reclassified as state "employees"? The Washington Examiner's Sean Higgins explains:

In 2005, then-Gov. Jennifer Granholm, a Democrat, created the Michigan Quality Community Care Council -- commonly referred to as "MQC3" -- ostensibly for the purpose of keeping tracking track of program's 45,000 participants. However the entity also made it legally possible for the state to claim the participants were actually employees and therefore eligible for collective bargaining.

The following year, Granholm signed a collective bargaining contract with SEIU Healthcare Michigan, after a mail-in ballot in which only 20 percent of the program participants voted. It is not clear how many in the program even knew an election was going on or what the ballot represented.

In short, a union-friendly administration created a state body to pose as the "employer" of home care workers receiving state assistance, and then conducted a stealth organizing campaign by mail. (A similar effort in Connecticut led CEI to partner with the Connecticut-based Yankee Institute to conduct our own mail campaign informing Connecticut home care workers that if they wanted to avoid unionization, they had to return the cards stating so.)

Unsurprisingly, many home care workers in Michigan were unhappy about having their assistance payments suddenly reduced because of dues payments to which they never consented. So when they could finally exit, they did. As a result, SEIU Healthcare Michigan's membership dropped from 55,000 in 2012 to under 11,000 the next year.

Moreover, 85 percent of econometric studies demonstrate this job-killing fact. U.S. News & World Report explains, “Proponents of a higher minimum wage point to a handful of studies that find no jobs effect to make their case. And it’s true, these studies do exist — but they’re in the extreme minority. Two economists from the Federal Reserve Board and the University of California-Irvine took the time to read all of the most credible research on the minimum wage from the past 20 years, and found an overwhelming 85 percent of it pointed to a decline in employment.”

James Buchanan, 1986 Nobel laureate in economics, famously wrote in The Wall Street Journal on April 25, 1996:

In a report released last week for CEI, I noted that developers need to be able to demonstrate automated vehicle safety benefits in order to justify releasing them to consumers. Based on road use and crash data, the critical milestone to reach is about 725,000 miles of crash-free driving in order to be 99 percent confident that automated vehicles are safer than manually driven ones.

Today, Chris Urmson, director of Google's Self-Driving Car Project, announced the company had reached nearly 700,000 miles of crash-free driving across its fleet of self-driving cars. Google's self-driving fleet has been involved in a couple of minor accidents, but they either occurred when the self-driving car was being manually driven or were due to the fault of another driver.

Google will be able to demonstrate safety benefits later this year when it hits the critical milestone. Once this occurs and research is published, expect even more private-sector investment and general public interest in automated vehicles to occur. But, as I've warned, this will also bring increased lawmaker and regulator attention.

As I detailed in my report, policy makers should take care to exercise great restraint in regulating automated vehicle technologies. Overregulation, particularly at this very early stage, risks locking in inferior first-generation technologies, delaying consumer availability, and increasing prices. The results of these good faith but foolish efforts would be increased property damage, injury, and death, as consumers are stuck in less safe, manually driven vehicles for longer than they otherwise would be.

Taxpayers of all races pay more when government contracts are doled out based on race, rather than awarded to the lowest bidder. That's one reason why it's great news that the Supreme Court reversed a ridiculous lower court decision claiming that it violates the Constitution for voters to ban racial preferences in state government. In its 6-to-2 decision Tuesday in Schuette v. Coalition to Defend Affirmative Action (BAMN), the Supreme Court overturned a contentious, 8-to-7 ruling by the Sixth Circuit Court of Appeals striking down a provision of the Michigan state constitution that rightly banned racial preferences in government contracts and employment, and in state college admissions.

That provision (Article I, §26) was added to the state constitution by a 2006 ballot initiative, known as Proposal 2 or the Michigan Civil Rights Initiative, which passed easily with 58 percent of the vote. The Supreme Court's moderate and conservative justices, along with one of the court's four liberals (Justice Stephen Breyer), voted to uphold that provision. Justice Sotomayor, who was appointed by President Obama, dissented, joined by liberal Justice Ruth Bader Ginsburg.

The Sixth Circuit's ruling, which claimed it violated the Constitution's equal protection clause to mandate that people be treated equally without regard to their race, defied common sense: It is nonsensical to argue that the Equal Protection Clause requires that people be treated unequally. The Sixth Circuit's ruling also conflicted with rulings the California Supreme Court and the Ninth Circuit Court of Appeals upholding a materially-indistinguishable provision added to California's state constitution, known as the California Civil Rights Initiative or Proposition 209. That provision, approved by California voters in 1996, was upheld in 1997 by the Ninth Circuit, and later upheld by the California Supreme Court in 2010 in a 6-to-1 vote.

The Sixth Circuit’s strange ruling that voters cannot limit racial preferences through ballot initiatives risked harming taxpayers by increasing the cost of government contracts. Even fairly mild government affirmative action programs that do not impose racial quotas nevertheless impose substantial costs on taxpayers. For example, in the Domar Electric case, Los Angeles accepted a bid for almost $4 million to complete a contract rather than the lowest bid of approximately $3.3 million, at a cost to taxpayers of more than $650,000. The lowest bidder was rejected solely because it failed to engage in affirmative action in subcontracting. California’s Proposition 209 later limited this sort of racial favoritism by banning racial preferences, voiding a number of state affirmative-action programs, and thus saving taxpayers millions of dollars.

Justice Sotomayor's dissent purported to rely on the controversial “political restructuring” doctrine, which holds that shifting a decision on a public policy issue from one level or branch of government to another is sometimes unconstitutional if it disadvantages minorities. (The Cato Institute's Walter Olson discusses the incoherent nature of this doctrine at this link.)

As Justice Sonia Sotomayor put it in her dissenting opinion, the doctrine applies in cases where the state “reconfigur[es] the existing political process… in a manner that burdened racial minorities." But as law professor Ilya Somin notes, this begs the question, since racial preferences harm racial minorities, such as Asian-American college and magnet-school applicants (who often must meet even higher standards than white applicants to be admitted). Thus, Michigan's ban on racial preferences helped, rather than "burdened," many members of racial-minority groups. Like the Asian American Legal Foundation, which filed briefs in support of Michigan's Proposal 2, I look forward to the day when my Asian niece and nephew are judged by the content of their character, not the shape of their eyes or the color of their skin.

CEI General Counsel Sam Kazman about to take a spin in Google's self-driving car. (Photo by Marc Scribner)

For the past several years, I've been writing about highly automated vehicles -- widely referred to as driverless cars -- and the huge potential they have in reducing injuries and deaths (over 30,000 Americans die on the roads every year), improving mobility for the disabled and elderly, reducing the drudgery of commuting, and helping the environment... provided policy makers don't mess it up with onerous laws and regulations (see here,here, here, here, here, here, here, and here).

On three separate panels, I testified last week against the flaws inherent in the National Labor Relations Board’s (NLRB) latest proposed rule.

The NLRB benignly purports to re-examine “Representation Case Procedures.” The rulemaking is commonly known as the ambush elections rule, as a result of a key component that could require elections in as few as ten days.

FIRST PANEL

On the first panel, I addressed the election date at the heart of the proposal. Approvingly quoting a letter from eighteen United States Senators who commented against the proposed rule, I noted that, “then-Senator John F. Kennedy stated that it was essential to allow ‘at least a 30-day interval between the request for an election and the hold of an election’ in order to ‘safeguard against rushing employees into an election where they are unfamiliar with the issues.’”

The crux of then-Senator Kennedy’s statement is a focus on safeguarding employees and on ensuring that effectively educating employees remains the Board’s focus.

ANALOGY TO STUDENTS’ STUDIES

Pointing out that the median times for elections are on the order of 40 days and that the proposal could call for elections in as few as ten days, I asked, “Would your students benefit from a 75-percent reduction in study time?”

I pointed out that workers, who already have a job and many of whom have families and hobbies, are challenged with essentially learning a crash course in labor law and labor economics—two arcane and intricate areas normally pursued by highly trained specialists with advanced degrees.

An absolute minimum of 30 days and really a routine minimum of sixty days are appropriate to learn such material.

The Competitive Enterprise Institute scored Wednesday’s vote in the U.S. Senate on the passage of S. 3772, The Paycheck Fairness Act, a bill that would fundamentally change the Equal Pay Act of 1963, which prohibits employers from paying women less than men for performing the same work in the same workplace.